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Saturday, September 12, 2009

Large Cap Stock To Buy - Engineers India Limited

EIL provides a complete range of project services right from conceptualization, designing and engineering to LSTK projects in diverse fields like petroleum refineries, pipelines, petrochemicals, oil & gas processing, offshore structures & platforms, fertilizers, metallurgy and power.

Company has diversified into infrastructure consultancy area like Urban Development, Airport development, Water Management, Railway Freight Corridor and Intelligent Buildings.

EIL has identified the following growth drivers:

– Internationalise aggressively in existing sectors targeting mid-large sized EPC projects in Brazil, Middle-East, etc

– Nuclear power and Water management

– Solar power and CTL (Coal-to-Liquid) projects

– All existing core areas including hydrocarbon, etc.

Company will be leveraging knowledge / designing / engineering base and project management skills in India and overseas through:

– 50:50 JV with Tata Projects specialized in execution of large projects on LSTK basis, in the areas of power, hydrocarbon, fertilizers, infrastructure etc. in India and overseas.

– 30:70 JV with global leader Tecnimont-Italy (Euro 2 billion) for executing EPC projects in UAE. While EIL will undertake engineering & project management work, Tecnimont would be responsible for construction. With oil prices stabilizing, this JV is expected to get an impetus for orders.

These JVs will further add great value to its core business by diversifying from major reliance on hydrocarbon industry and expanding geography beyond India.

• Current order book is Rs. 8,000 crore divided almost equally (50:50) between Consultancy & LSTK. Export order book – about Rs. 350 crore. Project cycle is 30-36 months. Company expects to maintain at same level of order book by year end (FY2010).

• On LSTK side, margins will be protected, as company is now going more for open-book orders, where input cost increases are passed through.

• EIL has surplus cash of about Rs 2,061 crore, i.e. Rs 367 per share. It has received necessary approvals to develop about 33 acres of land in Gurgaon on outskirts of New Delhi and is currently evaluating different options to maximize shareholders’ value.

Market Cap 5,774.53
EPS (TTM) 69.07
P/E 14.89
P/C 14.49
* Book Value 244.91
* Price/Book 4.20
Div(%) 185.00
Div Yield(%) 1.80
Market Lot 1.00
Face Value 10.00
Industry P/E 20.02

For Q1 FY2010, Revenues grew by 55.1% to Rs 391.4 crore and OPM% zoomed to 25.8% from 17.1%. PAT is higher by 86% to Rs. 94.2 crore. Expected EPS for FY10 is Rs. 80.

In view of very encouraging future prospects, EIL is an excellent investment from a long-term perspective.

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